Interim guidance statement regarding the elimination of the penny

Feb. 26, 2026

Purpose

The United States Treasury has stopped minting the penny. Although the penny remains legal tender, retailers may not be able to provide exact change when customers pay with cash due to shortages of the penny and may choose to round their cash transactions.

Examples found in this interim guidance statement identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The tax results of other situations must be determined after a review of all facts and circumstances.

Sales Tax Calculation

If a retailer chooses to round the total amount due to the shortage of pennies, this rounding does not alter the sales tax calculation itself.

If a cash transaction requires change to be given to the customer, retailers may choose their own rounding procedures. For example, they may round up or down to the nearest nickel, round all transactions up to the nearest nickel, or round all transactions down to the nearest nickel. Whichever rounding method is used, sales tax remains due on the sales price prior to the retailer applying rounding due to the lack of pennies.

Business and Occupation (B&O) Tax on gain from rounding

Currently, when rounding results in a gain to the seller, the gain is gross income of the business subject to B&O tax under the Service & Other Activities classification. A rounding loss is a cost of doing business and may not be deducted from the seller’s gross income of the business.

However, the department is aware of legislation that may affect the B&O taxability of gains or losses from rounding. Due to this uncertainty and the unique circumstances concerning the elimination of the penny, in the interim, the department will not take action to enforce B&O tax liability on gains from rounding on a prospective basis following the publication of final guidance.

Example 1 – Rounding Down

Facts: Retailer A sells items having a total taxable selling price of $69.99 in its store in a location with combined sales tax rate of 8.4%. Retailer A uses a rounding method when pennies are unavailable to round the total to the nearest nickel.

Result: The selling price is $69.99 and retail sales tax is determined before rounding.

• Selling Price: $69.99
• Retail sales tax (8.4%): $5.88.
• Before rounding the total: $75.87

Retailer A rounds the transaction down and the cost to purchaser is $75.85. Retailer A must remit $5.88 in sales tax and has gross income of $69.99, subject to retailing B&O tax.

Example 2 – Rounding Up

Facts: Same as Example 1, except the total taxable selling price is $70.00.

Result: The selling price is $70.00 and retail sales tax is determined before rounding.

• Selling Price: $70.00
• Retail sales tax (8.4%): $5.88.
• Before rounding the total: $75.88

Retailer A rounds the transaction up and the cost to purchaser is $75.90. Retailer A must remit $5.88 in sales tax and has gross income of $70.00 subject to retailing B&O tax.

Taxpayer instructions

The department will continue to review these issues for purposes of developing final guidance. This interim guidance statement will remain in effect until the department issues final guidance, cancels this interim statement, or new legislation is enacted. 

If you have questions about this guidance, please contact the department at rulings@dor.wa.gov.